THE ESCROW ACCOUNT MECHANISM AS A TOOL FOR STIMULATING ECONOMIC DEVELOPMENT IN UKRAINE

Abstract

The relevance of studying escrow account mechanisms in the context of Ukraine's economic development is determined by the growing need to ensure transparency, financial security, and trust in contractual relationships under conditions of economic instability. Escrow, as a financial tool, combines elements of settlement, security, and enforcement of contractual obligations. Its application becomes particularly significant in the context of financial uncertainty, low levels of institutional trust, and the necessity to improve business conditions for small and medium-sized enterprises. The purpose of this article is to explore how escrow mechanisms can be adapted and integrated into the national financial infrastructure to stimulate sustainable economic growth in Ukraine. The research methodology is based on systemic analysis, comparative legal methods, and modeling of institutional mechanisms. This approach made it possible to evaluate the effectiveness of escrow in various contexts, including public-private partnerships, state compensation programs, and commercial transactions. The normative framework was analyzed with a focus on recent regulatory changes, including the Resolution of the Cabinet of Ministers of Ukraine № 1016, which provided a legal basis for using escrow accounts in state support for factoring contracts. The author also applied the method of logical generalization to determine the prospects for broader implementation of escrow services in the national economy. The results of the research demonstrate that the use of escrow accounts in Ukraine is currently at an early stage of development, with limited application primarily in corporate transactions, minor shareholder buyouts, and individual real estate deals. However, recent regulatory initiatives have opened new opportunities for institutionalizing escrow as a tool of state financial policy. Specifically, the implementation of escrow accounts within the framework of compensation mechanisms for business support introduces an additional layer of accountability and safeguards budgetary funds. It also promotes financial discipline among entrepreneurs and reduces risks of non-performance in contractual obligations. Furthermore, the ability to secure obligations through a neutral third party – typically a bank – enhances the confidence of market participants and may serve as a catalyst for attracting investment, including foreign capital. The practical value of the article lies in its emphasis on aligning the development of escrow services with broader economic policy objectives. The author proposes to extend the scope of escrow beyond its current use by including it in public-private partnership projects, infrastructure restoration programs, and startup financing schemes. A critical recommendation is to expand the list of eligible escrow agents, for instance, by allowing licensed notaries and legal entities to act in this role, thereby improving access and reducing administrative barriers. Another important proposal is the harmonization of Ukrainian legislation with international standards to ensure legal clarity, especially regarding taxation, liability, and enforcement procedures in escrow agreements.